You Ask, We Analyze: Is There More Upside Ahead For The SPDR S&P 500, Or Will It Be Dragged By Death Cross?

On Thursday evening, Benzinga asked its followers on Twitter what they’re buying at the open on Friday. Benzinga selected one ticker from the replies for technical analysis.

@RichardJudge17 and @Surfer1Cal are buying the SPDR S&P 500 SPY.

The SPY has been volatile so far this year, whipsawing over 1.5% on many days and over 4% on some days, compared to the less than 1% swings that were common in 2021.

Russia’s invasion of Ukraine and the lead up to the Federal Reserve’s monthly meeting in March weighed heavily on investors, with the SPY falling almost 15% between the Jan. 4 all-time high of $479.98 and the low of $415.79 printed on March 14.

On Wednesday, the Fed raised its target rate hike to between .25bps and .5bps and projected it could raise interest rates five more times in 2022. The market reacted bullishly to the news, and the SPY closed that trading day up 2.22% and rallied an additional 1.25% higher on Thursday.

Volatility is likely to stick around for some time. Unlike the Fed’s decision, which is now known to the market, the war in Ukraine is unlikely to end anytime soon and presents many unknowns that could cause large swings.

See Also: How The Fed's Rate Increase Will Affect You

The SPY Chart: On March 15, the SPY closed slightly above the top descending trendline of a falling channel pattern that had been holding the ETF down since reaching its all-time high. The following day, the SPY gapped up to open the trading day, fell down to test the top of the pattern as support and held, before rallying to close the session at the high-of-day.

The break up from the falling channel was made on higher-than-average volume, which indicated the pattern was recognized, and on Thursday bullish momentum came in and drove the ETF higher. When a stock or ETF breaks up bullishly from a falling channel it can indicate a big reversal to the upside is in the cards.

On Friday, the SPY opened slightly lower but bulls came in and bought the dip, which caused the ETF to rise up slightly from its opening price. The SPY was unable to spike up above Thursday’s highest price, however, which may cause the ETF to print an inside bar pattern on the daily chart.

In this case, the inside bar leans bullish because the SPY was trading higher before forming the pattern. Traders and investors can watch for a break from the pattern later on Friday or on Monday to gauge future direction.

The SPY is trading above the eight-day and 21-day exponential moving averages (EMAs) and if the ETF can remain trading above them for a few more days the eight-day EMA will cross above the 21-day, which would be bullish.

The SPY may run into heavy resistance at the 50-day simple moving average SMA), which is overhead at about the $442 mark, as the 50-day SMA crossed below the 200-day SMA Monday, which completed a death cross on the SPY’s chart.

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• Bulls want to see continued sideways consolidation and then for big bullish volume to come in and drive the SPY up above both the 50-day and 200-day SMA, which will eventually reverse the death cross and cause a golden cross. The SPY has resistance above at $447.06 and $454.05.
• Bears the SPY reject the 50-day SMA and then for bit bearish volume to come in and drop the SPY back down into the falling channel pattern, which could eventually cause the ETF to a key support level at $420. Before reaching that level, there is support below at $437.92 and $433.69.